What is a Payroll Statement?

A Payroll Statement, or in some cases a Payroll and Earnings Statement, is a form that is used to provide details and information on an employee’s salary within a given period of time. The form generally asks for information related to an employee’s wages and earnings, and the taxes and deductions that would affect said wages.

All organizations that engage in business that requires them to hire employees have a payroll that records all information regarding their employees’ salaries. Payrolls are prepared for specific periods of time, most often a month. These periods are called pay periods, or the length of time during which the employee’s work is recorded and paid for (usually at the tail end of the pay period).

These documents are, especially for larger-sized corporations and organizations, often handled by the Human Resources or Finance department. Other corporations and organizations outsource the preparation of the payroll documents to other, specialized businesses that handle the processing of such documents.

With the increasing popularity of technology and digital options for the processing of documents like payroll statements, some companies use programs that simply require their employees to input their hours into an Application Programming Interface (API), which then processes and deposits the employees’ pay into their bank accounts.

Payroll statements are important as a record of the proper wages owed to each employee, ensuring that the correct salary is being paid according to the employee’s tax deductions and the amount of hours worked over the period covered in the payroll. Information from a payroll statement may also be important for both employee and employer for the purpose of filing their tax returns.

There are also some special rules that can be reflected in a payroll statement. For example, one such rule is that any employer that has gross sales of $500,000 or more per year must pay overtime (defined as any hours in excess of 40 hours worked per week) to be paid at one and a half (1.5) times the regular hourly rate. This is called the Fair Labor Standards Act (FLSA), which ensures that protected from unfair labor practices by enforcing labor regulations such as minimum wage, the above-mentioned requirements for overtime pay, and limitations on child labor.

How to fill out a Payroll Statement?

Payroll statements are very simple forms to fill out. However, it is important that you are aware of the time period being covered in the payroll statement, and that you have a proper record of information on the earnings of the employee that the payroll statement concerns.

Make sure you have the necessary documents on hand as you fill the payroll statement out so that you can be sure that you are entering correct and updated information.

Employer

Enter the name of the employer here. This can be the owner of a business or the name of the company or organization that the employee works for.

Employee Name

Enter the full name of the employee here.

Employee Number

Enter the employee’s employee number here.

Salary at the Beginning of the Period

Enter the employee’s salary at the beginning of the given period for this payroll. For example, if the payroll statement is covering a monthly pay period, enter the employee’s salary at the start of the month here.

Salary at the End of the Period

Enter the employee’s salary at the end of the given period for this payroll. For example, if the payroll statement is covering a monthly pay period, enter the employee’s salary at the end of the month here.

Earnings

Regular Hours Worked - Days of the Week

Enter the total amount of hours that the employee worked per day of the week throughout the pay period.

Regular Hours Worked - Total Hours

Enter the sum of all the hours worked from Sunday to Saturday (not including Overtime) here.

Regular Hours Worked - Rate per Hour

Enter the hourly rate for the employee’s work here.

Regular Hours Worked - Total Earnings

Multiply the Rate per Hour with the Total Hours worked, then enter the product here.

Overtime - Days of the Week

Enter the total amount of overtime that the employee rendered throughout the pay period.

Overtime - Total Hours

Enter the sum of all the overtime taken from Sunday to Saturday here.

Overtime - Rate per Hour

Enter the hourly rate for overtime hours taken here.

Overtime - Total Earnings

Multiply the hourly rate for overtime with the total hours of overtime that the employee worked, and enter the product here.

Non-cash Compensation

If the employee was compensated for their work in a form besides cash, enter that compensation here. You may use an additional sheet of paper as needed to list the non-monetary benefits and compensation that the employee has received for their work for the employer.

Other Amounts Due

Enter any other amounts due to the employee from commissions, special allowances, and et cetera.

Total Wages or Salary

Add the amounts written in Regular Hours Worked - Total Earnings, Overtime - Total Earnings, and Other Amounts Due and enter the sum here.

Gratuity and Tips Received Directly by the Employee

Enter how much the employee received through gratuity and tips throughout the pay period.

Total Earnings

Add the Gratuity and Tips to the amount as written on Total Wages, and enter the sum here.

Tax Deductions

Federal Insurance Contributions Act (FICA)

Enter the amount deducted from the payroll of the employee by the FICA here.

Federal Income Tax Withheld

Enter the amount of federal income tax withheld from the payroll.

State Income Tax Withheld

Enter the amount of state income tax withheld from the payroll.

Less Total Tax Deductions

Enter the sum of the FICA, withheld federal income tax, and withheld state income tax here.

Net Earnings after Deductions

Subtract the Less Total Tax Deductions from the Total Earnings and enter the difference here.

Other Deductions

Non-cash compensation

Enter the amount of taxes withheld from the fair market value of the non-cash compensation(s) provided to the employee.

Gratuity and Tips Received Directly by the Employee

Enter the amount of taxes withheld from the gratuity or tips received by the employee.

Total of All Other Deductions

Enter the sum of Non-cash compensation and Gratuity and Tips Received here.

Payment method

Check the appropriate box corresponding to how you will pay the employee’s earnings. You may choose from:

Cash
Check
Account Transfer
Other (Specify in the space provided)

Net Amount Due

Subtract the Total of All Other Deductions from the amount written on Net Earnings after Deductions and enter the difference here.

Employee’s Signature

Have the employee sign in the space provided and write the date that the payroll statement was signed.

Frequently Asked Questions About a Payroll Statement

Who needs to use a Payroll Statement?

Typically, it is the employer who provides the filled-out payroll statement to the employee, who then confirms through their signature that the information in the statement is correct. This can be handled by Human Resources personnel or members of the Finance department. Smaller businesses, organizations, and other such entities will usually have the owner of the business fulfilling and providing the payroll statement, themselves.

Some businesses, organizations, and corporations outsource the preparation and filling out of payroll statements to other companies in order to streamline the process, in which case they provide information on the processing of the paychecks, the calculation of employee benefits, and the deductions from tax or otherwise to the company they are outsourcing the work to.

What are tips when filling out a Payroll Statement?

Payroll statements often contain sensitive information regarding an employee’s salary and earnings. Thus, it is important to keep them in a safe and organized space to avoid any issues.

Ensure all information entered is updated and correct. This will help to ensure that the employee will receive the correct amount of pay owed to them at the end of the pay period, and avoid issues surrounding the wages owed to the employee and the taxes involved in their wages.
Practice good contract management. It is important for both employer and employee to keep a copy of the payroll statement after it has been filled out for future use, whether as a backup or for reference for other purposes.

How do I make a payroll statement?

Here are some items to include when creating a payroll statement.

Employee's name, address, and social security number
Payroll period ending date
Hours worked each day — Including the total for the week if over 40 hours.
Regular hourly rate of pay — Use full rate of pay with overtime premium.
Hours worked at straight time rates
Total hours worked at regular and overtime rates
Total gross wages — It should be before deductions, such as taxes or insurance premiums.
Federal income tax withheld
State and local income tax withheld
Social Security tax withheld
Medicare tax withheld
Additional Medicare Tax
Allocated tips
Deductions
Net amount paid
Gross payroll
Name and address where payment is sent
Check or voucher — List cash payments separately and indicate where deducted funds will be returned.
Signature and date signed

As an employer, you must comply with the following guidelines when making a payroll statement:

The statement must be accurate, complete, and easy to read. It must provide enough information so the employee can check for the accuracy of the entries. If an employee has questions about any information on their paystub, they have the right to contact your company's payroll department or talk directly with you.
You are required to give employees a copy of their state wage payment law which describes how wages are paid, including details on when wages are due, how they should be paid, what deductions may apply, and several other topics related to payroll statements.
Keep in mind the requirement to provide employees with a statement within seven days after they have worked for your company.
You are required to keep payroll records for at least four years that include information about employees' pay, wage rates, deductions, and wage payment methods used. If an employee makes a claim against you in court due to lack of paid wages in their final paycheck or incorrect withholding information on their paystubs during the time they've previously worked for you, this will be considered evidence in court hearings.
You are responsible for keeping written payroll records available during business hours when requested by the Department of Labor.
When preparing employees' paychecks, provide employees with itemized wage statements that show all deductions for the pay period. This means providing information on how much was for federal income tax, state and local taxes, Social Security, Medicare, and other deductions.
If an employee asks to see their payroll records or asks questions about their paystub, make sure you are able to answer them in a timely manner, without putting the employee off until later. Make it clear that all employees are given full access to records related to wages they have earned for work done.
You might also be required by law to provide your new hire with written notice of employment conditions or contract terms such as salary basis (exempt vs nonexempt), regular schedule (workweek), starting rate of pay, and at what step they will receive raises during their employment.

What is the purpose of a payroll statement?

A payroll statement serves several purposes. It reports the payment of money and the withholdings made by an employer. A payroll statement should itemize deductions like:

Employer contributions to Social Security and Medicare;
Federal, state, and local income taxes taken from paychecks;
Repayment of an employee's debts owed to the company; or
Other debts that are owed to the employer.

In addition, a payroll statement lists both gross wages paid to an employee as well as withheld social security tax, Medicare tax, federal withholding tax, state withholding tax, and any other deductions from pay. It also calculates deductions for these items against an employee's total earnings from which it determines how much is available for paying a net check or issuing a W-2 form at year-end. Withholding tables used in making calculations are set by the federal government. All employers must use these tables to ensure that an appropriate amount of taxes is withheld from each paycheck.

Other important purposes that a payroll statement may serve are the following:

Records an employee's earnings for purposes of determining unemployment insurance eligibility.
Provides employees with proof that taxes are being withheld from their paychecks.
Lists total net pay for purposes of calculating payroll deductions for items such as health care insurance premiums, retirement savings contributions, and union dues.

What should be included in a payroll statement?

A payroll statement should include the following information:

The full name of employee — Include middle initial.
The employee’s address — Include number, street, and apartment number.
The employer's name and address — Include number, street, city or state, and ZIP code.
The date that the pay period ends — It can be in the following format: Month/Day/Year or Month-Day-Year.
The gross salary period covered by the payroll statement
The amount of Federal Income tax deducted in the current payroll period
The amount of Social Security taxes deducted in the current payroll period
The number of withholding allowances claimed on the W-4 form during the current payroll period
The total amount of net wages for the current payroll period.
The total amount paid to the employee for the payroll period including deductions and net wages — This must not include any other forms of payment such as bonuses, allowances, reimbursements, or retroactive pay increases or decreases from prior periods.
The employee’s hourly rate of pay (regular time only) — If applicable.
The overtime rate of pay — If applicable.
The number of hours worked at a straight-time rate for employees paid by the hour during the current payroll period.
The number of hours worked at an overtime rate for employees paid by the hour during the current payroll period
The overtime pay or compensatory time off if not paid when earned
The gross salary for the current payroll period including deductions and all forms of payment
The total amount of money currently owed to the employee due to additional payments or underpayment from previous periods including additions made through grievance proceedings, arbitration, or court action
The name of the person responsible for preparing this payroll statement
The signature of the person who prepared the payroll statement along with his or her title (for example, "Manager") and date signed — If a company representative signs on behalf of an individual, his/her title must be stated as well as the reason why he/she cannot sign personally. The employer's signature may be stamped rather than written if it is illegible.

Is earning statement the same as Form W-2?

An earning statement should not be confused with IRS Form W-2. An earning statement is proof of payment where the company would list all the details and services they provided in order to generate sales. This was created during an era when credit cards were not available and people had to pay for goods and services on a cash basis. This is comparable to many of the reports that are generated by modern accounting software.

The earning statement has evolved over time and is no longer being used in its original form. For example, sales tax was removed from this report when credit cards were introduced to make it easier for customers. However, some businesses continue to use the earning statement even today because they are more familiar with this type of report compared to forms like W-2 which are mainly used for reporting purposes.

IRS Form W-2 is used by employers to report the details of their employees' salaries, tax withholding, and other types of compensation. Every January, each worker has his/her own W-2 form which is mailed out to the address on record with the Social Security Administration. The method used to generate these forms has evolved over time (e.g., computerized) but the main purpose has remained consistent which is to report income for payment purposes.

During an audit where both earning statement and W-2 are being presented as proof of salary, it would be up to an IRS auditor which one they believe is more accurate since there are too many variables for them to measure between two reports that have different purposes.

What is the difference between a payroll summary and a payroll statement?

A payroll summary and a payroll statement are two completely different things. The payroll statement offers you a brief overview of your salary, while the payroll summary is a detailed record, showcasing calculations for different deductions in your salary.

If you are an employee, both these documents are important to you. If not, the payroll statement is what will help you understand how your salary got affected due to various deductions or allowances. Here's more on what these two statements are, and why they're important.

Payroll Statement

Your payroll statement lists down all of your remuneration items like basic pay, allowances, bonus, and incentives. This calculation sheet shows different calculations for everything that has been deducted from your monthly salary including contributions. It also contains information regarding the statutory deductions mandated by law such as income tax and service tax.

A Payroll Statement is submitted to employees by their employers. A new payroll statement is issued when there is a change in salary, like revisions in allowances and deductions. However, if you are not satisfied with your current statement you can ask your employer to make necessary changes in order to make it more accurate.

Payroll Summary

A payroll summary shows calculations for various deductions that have been made from your salary and the deductions you will be entitled to receive. It also includes a percentage wise break up of different allowances that have been given to you such as house rent allowance, and transport allowance.

A payroll summary is sent to employees by their employer after every three months or annually depending on the type of employment contract that has been signed with the company.?

Why should employers give employees a payroll statement?

Employers should provide employees with payroll statements to keep track of the salary and wages they have been paid. The statement should include all deductions from salary, such as tax withholdings, contributions to employee benefits programs, and any other deductions that were made during a pay period.

Payroll statements allow employees to make sure that their paychecks are correct, thus, preventing any possible problems with taxes, benefits, and even lawsuits. Moreover, payroll statements are valuable to employees when filing their tax returns or seeking advice from a financial planner. A pay stub simply shows the amount of money that was deposited in an employee's bank account, it does not show all deductions made.

Regardless of whether they are printed out by the employer or handed over personally by their supervisor or human resources director, payroll statements should always arrive with detailed information regarding deductions and be accompanied by an itemized list of benefits that have been included in the calculation for each paycheck. The statement must also include all relevant information regarding taxes withheld, including federal income tax withholdings, state tax withholdings, and local/city/municipal withholding if applicable according to individual states' regulations.

A payroll statement is considered an official document for which there are legal guidelines regarding how it should be prepared and distributed. As such, employers have a responsibility to provide their employees with these statements on a regular basis, usually once a month. In addition, it is important to note that employees are legally entitled to receive a payroll statement if they request one from their employer.

Are payroll statements useful for employers?

Payroll statements are not only beneficial to employees but also to employers. Employers can use payroll statements to calculate the amount of income tax, insurance premiums, and other deductions. Moreover, payroll statements are used to record the hours worked by employees. This means that employers can keep records of the number of hours their employees have worked, as well as the pay rates and hours worked per pay period.

In light of these benefits, employers should create payroll statements on a regular basis. This helps to ensure that they are complying with labor laws and regulations. Thus, it is important for every employer to make sure that they understand what a payroll statement is before creating one.

What are the types of payroll statements?

There are many different types of payroll statements available today, but all of them serve a particular purpose. The most common types include:

Regular Payroll Statement — Used to list the gross wage earnings an employee normally receives from an employer after deducting withholding taxes and other deductions such as pensions or health insurance premiums.
Overtime Pay Statement — Lists the gross wage earnings an employee normally receives from their employer after deducting withholding taxes and other deductions such as pensions or health insurance premiums. This statement differs from a regular payroll statement because the amount earned is based on a normal workweek schedule where more than forty hours are worked.
Regular Pay Statement (Aggregate) — This payroll statement lists all the gross wage earnings of an employee, but it does not show any type of deduction made to these earnings. It also includes extra pay items such as bonuses, commissions, incentive pay, etc.
Special Pay Statements — List special types of payments made by an employer to its employees that are not included in regular payroll statements for example per diem expense allowance or taxable benefits like company cars or cell phones.

Moreover, one can create custom payroll statements to achieve greater flexibility. For instance, an employer that uses the same tax tables for each employee can choose to print all employees' information on a single statement. This will reduce the number of paper statements needed and printing errors made. It will also save time because only one report needs to be printed instead of several individual ones.

Custom payroll statements allow employers to include or exclude certain items based on their needs. They may want to include other types of earnings, for example, bonuses paid in kind (like food) or paid holidays (if not included in a normal workweek). If they do decide to exclude unpaid leave like sickness days, employers need to ensure that proper reason is given because if these reasons are not cited, employees may assume that the leave is paid.

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